alt Hacker NewsYou said you are from Germany but not where you are now. If you are still in Germany, forget it. Just because you incorporate outside of Germany does not exempt your from any taxes (and its beauraucracies) in Germany. That is, even with an estonian corporation, you will owe german corporate taxes (plural - one goes to the state one to the county - a.k.a. Körperschaftsteuer and Gewerbesteuer). That implies you will have to do the same tax paperwork as with a german GmbH and file them official with the tax authorities (Steuererklärungen, Umsatzsteuerjahresabschluss) and the Bundesanzeiger (Jahresabschlussbilanz). Nothing gets easier with that setup.
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You're not wrong, but you're missing the best part. Estonian company does not pay taxes (*). As long as the money stays within the company he's golden. The company can pay for his car, his apartment/office, etc.
It is only when he decides to withdraw the money the problem occurs.
What you're saying applies to most EU countries. Here where I live you have to reside for majority of the year in given residency to pay taxes over there.
Here's the tricky part.
Estonia is part of Schengen Area. Which means you can travel there and back without passport. There's no paper trail of your arrangements. You can easily create a reality in which you reside there for majority of time.
But again, that's not the selling part of Estonian LTD. Which is - it's extremely easygoing and as long as money stays in the company you're not paying taxes.
Exactly. I'm German and simulated the constellation some year's ago. Verdict was, if you are inside the EU it won't pay out. The Estonian model is for people trying to participate in the EU market from outside.
This is why I was wondering what the point was. Surely most countries will claim taxes from you if you work there, so having an Estonian entity will do little?
Can someone explain the actual benefit of sitting in a developed country and charging via Estonia?
This is the best answer. Internally, we have to deal with bureaucracies of every country for employment and residencies. Separately.
It is about where the actual "effective management" is considered to be located: If you live in Germany permanently, the tax office can decided to tax you as if you were a Germany company - and yes, most of the times they do it.
If you travel regularly and have an office in Estonia and you make the effective management decisions there, you are obliged to Estonian tax system only.